Fry’s parent Kroger backs ’09 outlook

CINCINNATI – Kroger Co. leaders listed their company’s ability to target customers and its broad portfolio of corporate brands among its competitive advantages in luring spending by today’s cautious consumers.

The Cincinnati-based company, the nation’s largest traditional grocery chain, reinforced its earlier guidance at the Barclays Capital analysts conference Tuesday in New York.

Kroger, which is the parent company of Fry’s, expects full-year earnings of $2 to $2.05 per share in 2009. Analysts polled by Thomson Reuters expect $2.04 a share.

Kroger also repeated that it expects growth in identical-store sales to slow this year to 3 percent or 4 percent from a growth rate of 5 percent last year. Sales for stores open at least five quarters are a key retail gauge because they exclude stores that open or close during the year.

David B. Dillon, the company’s chairman and CEO, said the company’s future is bright and Kroger will deliver for investors even during the recession.

“In today’s economy, operating nearly any retail business is challenging,” Dillon said. “The good news about Kroger’s business is that people have to eat, and we’re positioned well to deliver value to customers at a time when they need it.”

Kroger customers are using more coupons and food stamps and giving other signs they’re trying to stretch their dollars, Dillon said. He said sales for Kroger’s no-frills, low-priced Value brand have been strong, but so has growth for its Private Selection brand, meant to compete with leading national brands but usually at a lower price.

Kroger reported earlier that 27 percent of its fourth-quarter grocery revenue came from sales of corporate brands.

Kroger’s use of loyalty cards in a data-mining partnership with London-based dunnhumby enables it to individualize coupon offers and direct mailings to customers, based on analysis of their purchase habits, and also to closely track buying patterns, Dillon said.

“These tools are essential at a time when the economy is causing consumer behavior to shift rapidly,” Dillon said. “No other U.S. grocery retailer can currently replicate this level of personalization.”

Dillon said Kroger estimates that 45 percent of the grocery business, or $100 billion in sales, in its major markets is held by grocers that lack Kroger’s competitive scale.

“We still see plenty of opportunity for us to grow our business,” Dillon said.

Kroger operates nearly 2,500 grocery stores in 31 states, including under some two dozen local banners such as Ralphs, Fred Meyer and Fry’s.

Kroger shares were up 32 cents, to $21.78, in late-morning trading. They have traded in a 52-week range of $19.39 to $30.99.

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